For older adults with significant personal resources, strategic giving is often a key part of their estate planning process. They make gifts to loved ones that do not create gift tax liability but that slowly diminished the value of their estate so that they won’t have to worry about estate taxes when they die.
They also derive the benefit of watching the people they love enjoy part of their inheritance. One of the ways that you could plan gifts for your grandchildren would include creating a special account under the Uniform Transfers to Minors Act (UTMA).
Is a UTMA account the right solution for your estate plan?
The benefits of a UTMA account
A UTMA account can create a system of structured giving for a child until they reach the age of adulthood. In some ways, it is not unlike a trust, which can set aside assets for a child and limit how they use those assets. The assets can be financial or even physical property, like fine art or real estate.
Unlike a trust, a UTMA account does not require a trustee to administer the assets, although there may be a custodian who manages the assets. That can be a beneficial feature for those who worry about family and members or fiduciaries abusing their authority. Additionally, unlike with a trust, the property in the UTMA account will typically remain part of the donor’s property until the minor reaches legal adulthood.
Structured giving can be a valuable tool
Adding a UTMA to your estate plan for the support of a grandchild can be a savvy move. Not only can you provide specific resources over a set amount of time for a loved one with a UTMA account, but you can also diminish your own estate to better qualify for benefits or minimize tax risks.
Rather than making thousands of dollars in direct gifts that might complicate someone’s financial and legal situation, making gifts through a UTMA account can be a way to preserve someone’s current resources while also augmenting their standard of living.
Adding the right tools to your estate plan, like a UTMA account, will make it easier for you to achieve goals related to the support of the people that you love.